Bringing brains back to Italy: tax breaks stimulate growth - do they work?

In Italy, the number of brains "returning" (rather than fleeing) is growing, thanks to the tax incentives granted to this special category of workers. The Budget Law for 2023 confirmed tax breaks for immigrants, teachers and professors returning to Italy. The trend is evident when looking at the latest statistics on tax returns for the 2021 tax period published in April 2023 by the Ministry of Economy and Finance (Mef). The benefits applied to 19,400 employees with an average annual income of €131,920. Those numbers are up from about 15,000 returning workers in 2020. The new residents regime was chosen by 690 individuals, and in the case of the discount for "teachers and researchers" we are talking about more than 1,600 people, compared to 1,329 in the previous year. Professionals who have an average annual income of €54,065.

But who is entitled to the benefit?

In detail, the benefit is granted if the employee was not a fiscal resident of Italy in the two preceding tax periods before the return. After the return, self-employment and entrepreneurial income earned in Italy is only counted in the formation of total income at 30% and for five tax periods. The benefit is extended for five years if the returned worker becomes the owner of a residential property in Italy, which can be acquired either in joint ownership or directly from a spouse, cohabitant or children, or if the worker has at least one minor or dependent child. In this particular case, the income is taken into account in determining the taxable base of personal income tax by 50% of the amount. And also for the next five tax periods.

To claim a tax credit, an employee must submit a written request to the employer, who will directly apply the tax credits (beginning with the pay period following the request and in calculating wages from the date of hire) by applying the deductions to the reduced taxable income base. Otherwise, if the employee-employee has not submitted any request, the taxpayer may take the benefit directly when filing an income tax return.